Inside The $19B Market Meltdown

14 June 2022, Baden-Wuerttemberg, Rottweil: The candlestick chart of the cryptocurrency Terra Luna with the sell-off is seen on the screen of a computer in an office. (Shot with zoom effect). Photo by Silas Stein/picture alliance via Getty Images

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On October 10, the crypto market endured its largest liquidation in history. In under 24 hours, over $19 billion in leveraged positions vanished. This affected 1.6 million traders and erased nearly $800 billion in market cap. Bitcoin alone printed an unprecedented $20,000 daily candle, sliding about 10% and briefly dipping below $110,000. Most altcoins fell 30–60%. Prices have since partially recovered, with bitcoin now trading near $115,000 — but the shock to the market was immense.

The scale of this liquidation event was unprecedented—nine times larger than any past one. Was it triggered by Donald Trump’s 100% tariff threat on China, by excessive leverage and exchange-side flaws, or by a perfect storm of manipulation and macro panic? To understand what happened, and what it means for the market’s future, we need to trace the sequence and the structure behind it.

Why Did The Crypto Market Crash?

Many linked the October 10 collapse to President Donald Trump’s surprise announcement of 100% tariffs on China. However, data shows the sell-off started hours before that. As The Kobeissi Letter notes, crypto prices started falling around 9:50 a.m. ET, long before Trump’s 4:50 p.m. tariff post. By 4:30 p.m., a large trader — a so-called whale — opened massive short positions on Binance, the world’s largest crypto exchange. Twenty minutes later, Trump made his announcement. By 5:20 p.m., total liquidations had reached $19.5 billion, with that same trader reportedly closing out for an estimated $192 million in profit.

The liquidation wave was heavily skewed toward overleveraged longs, with $16.7 billion in long positions erased versus $2.5 billion in shorts. This 6.7-to-1 ratio exposed how dangerously one-sided market positioning had become.

Yet the tariff headline was only the spark. The deeper fuel came from Binance itself. Crypto analyst ElonTrades explained that the crash exploited a loophole in Binance’s collateral system. It priced certain assets using internal market data rather than independent oracles. When attackers dumped roughly $90 million of USDe, the stablecoin’s price collapsed to $0.65 on Binance only (remaining $1 elsewhere). This instantly devalued traders’ collateral and triggered up to $1 billion in forced liquidations.

At the same time, the same actors held $1.1 billion in bitcoin and ether shorts on Hyperliquid, a decentralized derivatives platform. These positions were opened just before Trump’s tariff tweet and closed shortly after for the same $192 million profit noted above. As Binance’s liquidation engine started selling into thin liquidity, automated bots on other exchanges quickly amplified the fall worldwide.

“What looked like chaos,” the analyst concluded, “was actually a coordinated exploitation of Binance’s internal pricing system, amplified by a macro shock and systemic leverage.”

Compounding the problem, it appears that other Binance services also suffered in the crash. Crypto analyst Hanzo wrote that hours before the crash, one of the exchange’s market makers moved $700 million in assets to the exchange. When the markets began to weaken later that day, Binance’s order books abruptly thinned. Bids disappeared, liquidity evaporated, and automated systems froze. Traders found themselves unable to close positions or execute stop orders, even as liquidations continued to process.

Binance co-founder Yi He addressed the controversy shortly after, pledging to compensate users whose transactions failed to execute. She clarified, though, that losses caused by “market fluctuations or unrealized profits” would not be covered. The exchange also accelerated its planned rollout of oracle-based pricing.

Overall, the October 10 disaster was a perfect storm. Internal pricing flaws, shrinking liquidity, and high long exposure met fears over Trump’s China tariff threat, sparking a chain reaction that spread through every major crypto market.

What’s Next For The Crypto Market?

By every on-chain measure, the October 10 crash was a full-scale reset. Glassnode reported that funding rates plunged to their lowest levels since the 2022 bear market. CryptoQuant showed bitcoin open interest collapsing by $12 billion in a single day. The estimated leverage ratio, which shows how much traders borrow compared to exchange reserves, fell sharply, signalling that speculative excess has been wiped out.

Historically, such events have often preceded recovery. In this sense, the October crash may mark not an ending but a cleansing — painful yet constructive for long-term market structure. Still, rebuilding could take time. As Swissblock argues, bullish reconstruction requires two things: spot demand and patience. With bitcoin now hovering near $115,000, the $116,000–$116,500 range represents strong resistance. A sharp, V-shaped recovery isn’t impossible, but the more likely path is gradual rebuilding as traders regain conviction.

Signs of recovery are already visible. As Adam Kobeissi noted, since 5:30 PM ET bottom on Friday, total crypto market capitalization has added more than $550 billion. This marked one of the fastest wealth reversals in the industry’s history. The opening of traditional markets today will provide the next signal: whether upside momentum resumes or bulls face another test of strength.

The Deeper Lesson For The Crypto Market

The October 10 liquidation showed more than just a hot market. It revealed the weak infrastructure under crypto’s trillion-dollar surface. Despite years of institutionalization, much of the industry’s infrastructure remains opaque, centralized, and lightly supervised.

In traditional finance, circuit breakers, clearinghouse margins, and mandatory risk disclosures act as structural shock absorbers. Crypto finance, though faster and often more capital-efficient, still operates without comparable safeguards. In this case, it allowed a $90 million collateral mispricing on a single exchange to cascade into a $19 billion global liquidation.

The episode underscored how risk can quietly compound across interconnected exchanges through bots, cross-margin systems, and highly leveraged derivatives that few participants fully understand. When one venue fails, contagion travels rapidly, amplified by automated arbitrage and thin weekend liquidity.

Yet the rebound that followed tells another story. Bitcoin’s quick rebound and stable funding rates show a self-correcting market. Leverage has been cleared out, confidence is returning, and the structure is changing. It was an uncontrolled purge, but also a cleansing one.

The episode once again confirmed crypto’s internal hierarchy. If bitcoin’s 10% decline resembled a hard sneeze, altcoins caught the full-blown fever. With the exception of TRX and ETH, which fell 11% and 20% respectively, the rest of the top-25 cryptocurrencies plunged far deeper. XRP, SOL, and BNB each lost around 30%, while HYPE dropped more than 50% and DOGE nearly 60%.

This divergence reinforced what many analysts have long argued: in moments of systemic stress, bitcoin remains the only asset that truly functions. As one trader put it, “There’s Bitcoin — and there’s everything else.”

For now, bitcoin’s rebound has stabilized sentiment, but the episode will likely sharpen regulatory and institutional scrutiny of exchanges. If crypto market is to mature into a truly global financial system, its infrastructure must become as transparent and trustworthy as its technology.